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Where Do Your Debts Go When You Pass Away?

Quicken Loans article by Patrick Chism

debtLet’s start by acknowledging that death’s no fun to talk about. It’s easier to kick that rusty can down the road, saving those darker conversations for another day. But before you take the “financial ignorance is bliss” approach, you need to consider how your debt will affect your loved ones after you’re gone. In an ideal world, you wouldn’t have any debt to pass on to your family. But whether it’s caused by circumstances or life choices, some of us will inevitably be in the red even when we’re dead. Let’s take a deeper look at what happens to your debt when you’re gone.

Where There’s a Will

While we’re contemplating mortality, make sure you’ve taken some time to create a living will. Not only is it cheaper than ever before ($20–$50), but it allows you to better protect your estate and divvy it up as you see fit. Without a will, your assets will be handed over to the state and then given to your next of kin. If you want any say in where your estate is headed, make sure you sit down and make a will.

What Happens to My Debt When I Die?

After you’ve taken your final bow, your estate generally owes any of your debts. If you have enough assets to pay for these debts, someone known as an executor (such a cheery title) is responsible for selling those assets and settling up with the creditors. If your estate doesn’t have the funds to pay for these personal debts (this is called a solvent estate), then the debts typically die with you. But not always.

In the event that your estate does cover the amount of your debts, the rest of your estate is then given to your heirs. But remember, creditors will come before your heirs.

Undead Debts

The largest exception to the dying debts is when one of your loved ones acts as a guarantor or co-signs one of your loans. By doing this, they’re saying they will assume the loan if you can’t. And, to be frank, you can’t do much assuming when you’re dead.

This is also the case for spouses that have joint credit card accounts. Even if your spouse had nothing to do with that boat you purchased on a credit card, they’re still responsible for paying it off. This is not suggesting that you and your spouse should absolutely have separate accounts for your debts and assets. In fact, if managed well, that can be a powerful booster to your finances. But before you tie the financial knot with anyone, make sure you can trust their spending habits.

It’s important to note that an authorized user on a card is not the same thing as a co-signer. An authorized user will not be required to pay the debts of the deceased account holder.

Dying to Get Rid of Student Loans

It’s surprisingly difficult to have your student loans discharged. You can’t even get rid of them by filing for bankruptcy (in most cases). In life they’re attached to you like a bad tattoo. Death, however, is an excellent cure for most federal student loans.

Private banks aren’t nearly as forgiving of student loans. Private student loans can eat away at your estate if you haven’t planned a way to protect yourself (we’ll talk more about this in just a bit). Since 2009, though, many private student loan lenders have become better about wiping the slate clean after death, but each lender is different.

The Mortgage

According to federal law, a surviving spouse – with proof of financial ability and creditworthiness – will be able to take over the mortgage if you die, rather than paying the full balance back to the mortgage company. Once again, talking to your family is an important part in this process. You need to communicate the realities of the situation, specifically those that involve finances. In some cases, it may make sense for your spouse to downsize to a cheaper house so that they can have a more manageable monthly payment.

Protecting Your Estate from Debt

While there are always exceptions at the state level, in most cases, 401(k)s, life insurance policies, IRAs and brokerage accounts are protected from creditors. This allows you to list individuals as your beneficiaries, and it keeps the money from going to your estate. Remember, in an estate, creditors come before heirs.

The Exceptions: Community Property Laws

Some states have something called community property laws, which could definitely affect the way your debt is treated after you’re gone. These laws require that any debts or assets that you’ve obtained after you got married are also the responsibility of your spouse. In other words, even if your spouse isn’t on the car loan, he or she is still responsible for paying it off when you’re gone.

Below are 10 states in the U.S. that have community property laws: Arizona, California, Idaho Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska makes the list too, but residents have the option to make their property considered community property or not.

You Can’t Take It with You

Debt can certainly be a headache during life, but under certain circumstances, it can be a tragedy after death. If you’re not careful, your family could suffer the consequences. Discussing death isn’t easy, but do yourself and your loved ones a favor by sitting down and talking about these financial decisions. And if you have any questions at all, don’t hesitate to speak with a lawyer.


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Fidelity Boots Betterment… And Joins Growing List of Robo-Advisers

NY Times article by Ron Lieber 

fidelityFidelity Investments is flirting with the investment robots.

Fidelity is testing its own automated investing platform, which it is calling Fidelity Go. The move puts the company into head-to-head competition with so-called robo-adviser start-ups like Betterment and Wealthfront, as well as traditional players like Vanguard and Schwab that recently began offering similar services.

The Fidelity details are listed in a Securities and Exchange Commission filing, and a company phone representative confirmed the existence of the new service, as did a Fidelity spokesman.

At the moment, Fidelity Go is available to only a few hundred of the company’s employees, though Fidelity plans to invite some customers to test it early next year and then do a public introduction after that.

Like the competing products, the company will ask customers to fill out online questionnaires about their investment goals and risk tolerance. Then, it will suggest a low-cost portfolio of investments. Fidelity’s filing said the program would be free for now, though it eventually expected to charge a fee. The phone representative said it would cost 0.1 percent to 0.2 percent annually, not including the costs of the mutual or exchange-traded funds in the portfolio. Robert Beauregard, a Fidelity spokesman, said the company was still deciding what fees to charge.

Investment costs are where the rubber often meets the road in investing success, and Fidelity, in its filing, promised that the portfolio costs would be “lower than average.” While a “significant” portion of the portfolios, which will invest in stocks, bonds and presumably safer short-term investments, will be in investments that track market indexes, some money will go into Fidelity’s own actively managed mutual funds. That provides an advantage to customers only when those mutual funds outperform the index fund in its market segment over time. Most actively managed funds don’t accomplish that. Mr. Beauregard said that Fidelity would refund a majority of fees it earned from its own funds to Fidelity Go customers who invested in them.

These services have proved attractive to investors who say they believe that trying to beat the market is foolish and do not want the hassle of finding the best index funds and remembering to buy and sell them at the right times to make sure their portfolios are not getting too risky or too safe.

Over the last several years, Betterment and Wealthfront have each gathered about $3 billion in assets. Schwab’s Intelligent Portfolios offering, which it introduced in March, had collected $4.1 billion as of Sept. 30.

Vanguard reports $26 billion in its service, $16 billion of which it says is new to the firm, with the rest coming from existing accounts. It offers financial planning with people, in addition to automated investment management, for its 0.3 percent annual fee.


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Allen & Co. – The Advisory Firm To The Biggest Names

Business Insider article by Lucinda Shen

Lavish_carsSome of the biggest names in tech, telecom, and the media industries have one thing in common.

The tiny financial advisory firm quietly advising them on deals behind the scenes: Allen & Co.

The firm worked on the initial public offering of Ferrari, which priced on Tuesday night.

It is also an adviser on the flotation of Match Group, which is behind some of the world’s biggest dating apps and websites.

Those are just the latest in a long line of landmark roles for the firm. It has previously worked on deals for the likes of Facebook and Google.

The firm shuns the spotlight. It has no website (this one belongs to a different company), and employs fewer than 200 people. A spokesperson for the firm did not respond to a call seeking comment in time for publication.

Herbert Allen Jr. led the company for years, and has a seat on the board of Coca-Cola. His son Herb Allen III, who is now CEO at the firm, was named on Vanity Fair’s new establishment list in 2012.

Many of the deals the company works on are birthed during the firm’s secretive annual Sun Valley Conference, which is sometimes described as the “Billionaire’s Summer Camp.”Hollywood celebrities mingle with CEOs like Bill Gates and Elon Musk.

Here is a list the firm’s best-known clients.


Sector: Auto

About: The IPO of luxury carmaker Ferrari is one of the most hyped deals of 2015.

The Italian supercar maker priced its initial public offering on Tuesday at $52 per share, with shares trading up at the open.

Allen & Co. was a bookrunner 0n the deal.

Time Warner Cable

Sector: Telecom

About: Allen & Co. advised Time Warner Cable on its $80 billion merger with Charter Communications, which was announced in May 2015. The deal will make the combined entity the second-largest cable provider in the US.


Sector: Technology

About: Allen & Co. advised on the separation of PayPal and eBay in July 2015, in a deal worth $49.16 billion.


Sector: Technology

About: Allen & Co. landed a role on Facebook’s giant IPO in 2012, in a deal which raised $16 billion on the Nasdaq.

The firm later worked on Facebook’s acquisition of popular instant-messaging platform WhatsApp for $21.94 billion in 2014.

The app now boasts 900 million active monthly users, while Facebook’s in-house app, Messenger, claims 600 million monthly users.


Sector: Technology

About: Allen & Co. acted as an underwriter on Twitter’s IPO, which raised $2.1 billion in November 2013.


Sector: Technology

About: Allen & Co. was one of advisers on Google’s IPO in 2004. The sale priced at $85 a share and raised $1.67 billion — coming in below expectations at the time.


Sector: Technology

About: LinkedIn raised $352.8 million in a 2011 initial public offering, with Allen & Co. working on the deal.

Coca-Cola Co.

Sector: Food & Beverage

About: Allen & Co. advised Coca-Cola Co. on its $13.6 billion acquisition of bottling company Coca-Cola Enterprises Inc. in February 2010.


Sector: Telecom

About: Allen & Co. advised Activision, a game-development company, on its $12.4 billion merger with Vivendi in 2007.

In 2013, Activision bought about $8.2 billion worth of shares from Vivendi, with Allen & Co. again advising on the transaction.

Sector: Online Retail

About: is a Chinese ecommerce website founded by CEO Liu Qiangdong.

In May 2014, Allen & Co. acted as one of the joint bookrunners on its IPO on the NASDAQ, which raised $2.05 billion. At the time, it was the biggest Chinese IPO ever.


Sector: Online Retail

About: Allen & Co. acted as a joint bookrunner for the company in 2011, for a deal that raised $805 million on the Nasdaq.

Most recently, the company cut 10% of its workforce.


Sector: Technology

About: Workday is a cloud-based-software company that creates payroll- and financial- management platforms for large companies. It went public in 2012, raising $733 million with the help of Allen & Co. as a bookrunner.

Allen & Co. again jumped in in 2014 to help the company through its follow-on offering, which raised $614 million deal.

Pure Storage Inc.

Sector: Technology

About: A flash-storage provider, Pure Storage was one of the most watched IPOs of 2015 — but closed below its $17 per share IPO price.

Allen & Co. was a bookrunner on the offering.


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Betterment, the “Robo-Adviser”, Tops $3B in AUM

NY Post article by Kevin Dugan

robo graphicThere’s a new top robot in town.

Betterment, a seven-year old “robo-adviser” wealth manager, surpassed rival Wealthfront this week after surpassing $3 billion in assets under management — nearly tripling client funds since January, CEO Jon Stein told The Post.

The milestone comes seven months after an online spat erupted among Betterment, Wealthfront, and Charles Schwab, which had started its own automatic investing platform.

At that time, each company was amping up its marketing battle plan and publicly dissed their rivals’ fee structure in an attempt to woo new customers.

“When Schwab entered the space there were a lot in the industry saying, ‘Oh this is going to be trouble for Betterment,” Stein said. “In fact, what we saw was that we started growing faster.”

Schwab, which has almost $2.5 trillion in total assets, has more than $4 billion invested in its robo-platform, spokeswoman Alison Wertheim told The Post.

Robo-advisers are online-centered investing platforms that rely on automatic investing strategies rather than flesh-and-blood wealth managers.

While Betterment has a tiny amount of assets under management compared to traditional wealth managers, it recently has gotten approval from Goldman Sachs so that its employees can use the platform alongside Fidelity for investing.

Betterment also is in talks with JPMorgan Chase for the same approval, Stein said.

Kate Wauck, a Wealthfront spokeswoman, declined to provide a precise figure of the company’s assets, and instead referred to the Web site that boasts of “nearly $3 billion of [clients’] assets.”


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FINRA Seeks to Better Connect Firms With Their BrokerCheck Ratings

New York Law Journal article by Evan Charkes

U.S._Securities_and_Exchange_Commission_headquartersOver the past several years, the Financial Industry Regulatory Authority, Inc. (FINRA) has sought to deepen retail investors’ awareness of its BrokerCheck public disclosure system by issuing a series of rule proposals that would link this system to its member firms’ websites and other of their social media presence pages.1 BrokerCheck allows a retail investor to access information such as education, licenses and disciplinary history about a registered representative or broker-dealer before choosing to do business with that person or firm.

Recently, the Securities and Exchange Commission (SEC) approved FINRA’s proposal to amend Rule 2210 to require each member firm’s website to include a readily apparent reference and hyperlink to BrokerCheck on its initial webpage or any other webpage that contains a professional profile of a registered representative who conducts securities business with retail investors.2

This rule was generally supported by both the securities industry and investor advocacy groups, although each did not achieve all that it sought in their respective comment letters to the proposal. This article will summarize the background to the rule and specific practical aspects addressed by FINRA during the rulemaking process.

Early Stages

By regulatory notice FINRA initially proposed changes to BrokerCheck in 2012 to address recommendations made by the SEC in its 2011 study of investment advisers and broker-dealers. Section 919B of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that the SEC conduct this study.3

In January 2013, FINRA formally filed with the SEC its first proposed rule that would have required member firms to include a prominent description of, and link to, BrokerCheck on their websites, social media pages and any comparable Internet presence.4 This rule filing would have required firms to use a “deep link” to the BrokerCheck summary reports specific to each firm and their registered representative.

This “deep link” requirement caused significant concern within the securities industry because of the operational difficulties it would have entailed to link a webpage directly to a specific BrokerCheck entry for a particular registered representative. FINRA withdrew this filing to assess and respond to concerns raised.5

In its next filing, in April 2014, FINRA eliminated the “deep link” requirement. Instead, FINRA proposed a “readily apparent” reference and hyperlink to BrokerCheck on the firm’s website, and any other online retail communication that contained a professional profile or other contact information pages.6 This proposal specifically required a hyperlink to third-party websites. Industry advocates opposed this latter requirement because the member firm did not control such sites and would make it difficult to implement from a compliance perspective.7

The April 2014 proposal also excluded: (i) email and text messages, (ii) retail communications posted on online interactive forums, (iii) member firms that do not provide products or services to retail investors, and (iv) directories or lists of registered persons limited to name and contact information.

June 2015 Rule Filing

More than a year passed before FINRA filed its current proposal to amend Rule 2210.8 In this June 2015 filing, FINRA addressed many of the significant concerns raised in prior comment letters, and in particular, eliminated the requirement to link to third-party websites not controlled by a member firm, including, for example, LinkedIn, Twitter, and Facebook pages and YouTube channels. FINRA also maintained the exceptions to the rule’s requirements from the April 2014 filing.

In its June 2015 rule filing, FINRA made clear that the scope of the rule applied only to a firm’s website, but left the door open to future rulemaking regarding links on third-party websites. One would expect the securities industry to raise the same operational challenges in the future unless the technology dramatically changes. Notably, the approved rule continued the basic paradigm of requiring a “readily apparent” reference and link to BrokerCheck on the initial webpage that the member firm intends to be viewed by retail investors and any other webpage that includes a professional profile of a registered representative.9

FINRA took note of the securities industry’s objections to the “deep link” requirement because it “could potentially increase website maintenance costs” and noted that “most investors should be able to find information concerning particular members or registered representatives without difficulty given the ease of operation of the BrokerCheck search feature.”10 Thus, the “deep link” requirement was not part of the June 2015 amended filing.

Although emails, text messages, and retail communications posted on online interactive forums are clearly outside the scope of the rule, FINRA chose to remove these exceptions from the actual final rule proposal as “unnecessary” since the rule “by its terms applies to a member’s own website” only.11 The June 2015 filing also clarified that links are required only for webpages about profiles of “registered persons,” and not profiles of “associated persons,” and that if a firm’s webpage includes profile information about multiple registered persons, only one link to BrokerCheck is required.12

Guidance for Implementation

During the final stages of the rulemaking process, and prior to the SEC approval, FINRA provided meaningful interpretive guidance that member firms will be able to use during their implementation efforts. In particular, FINRA stated that:

• If a member firm were also part of a larger financial institution, FINRA clarified that a “member’s own website” means whether the website promotes the business of the member firm and is intended to be viewed by retail investors. Thus, if an independent contractor registered representative promoted the business of the member firm on his or her website, then the rule would apply.

• The linking requirement did not apply to an enterprise-level or parent company homepage or other webpage that merely referenced an affiliated broker-dealer.

• A hyperlink is not required for webpages of a branch office of the member firm or branch office personnel unless these were actually separate websites.

• A hyperlink is required if the branch office or branch personnel site contains profile information.

• Microsites—which are individual webpages that function independently from the main website of the broker dealer—are out of scope if they act “solely as a conduit to the member’s main website” which then contains the hyperlink.13

FINRA also addressed several specific practical issues, notably:

• Links are not required on every webpage of a member’s website.

• Firms may use “buffer” screens or interstitial exiting site pages—which are pop-ups on the screen—to inform investors that they are leaving the member’s website prior to connecting to BrokerCheck.

• Firms may use “widgets” (which are applications placed directly on the website) as a way to link to BrokerCheck so long as the link and reference to BrokerCheck are “readily apparent.”14

FINRA made clear that the rule does apply with respect to mobile device applications that provide access to a registered representative’s profile information.15

A critical issue that firms need to address is how to apply the “readily apparent” standard. FINRA does not define this term. Rather, FINRA stated that firms have “flexibility” about where to place the hyperlink to BrokerCheck so long as the firm meets this standard.16 FINRA stated that it expected that the reference itself would be “brief,” and later noted that it would be making available to member firms “optional” BrokerCheck-related icons or similar resources.17 Presumably, these FINRA-created icons will be concise and not create space issues with respect to placement.

FINRA identified three specific and non-exhaustive factors that it would review to determine whether the “readily apparent” standard was being met: (i) placement (i.e., how visible is it on the landing page; if scrolling is required, whether it is clear that information is available below the screen; whether the hyperlink is buried in a long paragraph); (ii) font size (is it the same size as other information on the page); and (iii) font color (does it contrast or blend in with the website’s background).18

Firms also should pay attention to FINRA’s comment that placing the reference and hyperlink to BrokerCheck in a footer would not satisfy the “readily apparent” requirement.19 FINRA did not provide any more “specific guidance” regarding the term “readily apparent.”

With respect to mobile devices, FINRA chose not to mandate a specific placement and gave firms flexibility as to the location of the reference and the link.20 FINRA also rejected the notion of a limited “safe harbor” for firms if the hyperlinks to BrokerCheck became broken as a result of script or programming issues and the firms then took a reasonable time to fix the link. Rather, FINRA stated it would review the circumstances of the failure, but expected firms to “expeditiously” address the problem.21

Finally, with respect to timing of the rule’s effectiveness, FINRA suggested a six-month implementation period in their June 2015 filing, and now that the SEC approved the filing, the remaining step is for FINRA to publish a Regulatory Notice with the final compliance effective date.

Even without the specific effective date, firms would be wise to identify affected websites and webpages that identify professional profiles, and determine how they will comply with the “readily apparent” standard. Decisions based on the FINRA interpretive guidance will also greatly help firms manage their implementation efforts. One would expect that the amended rule will benefit retail investors who will now have easier access to FINRA’s database of information regarding member firms and individual registered representatives.


1. Investors can access BrokerCheck at no charge by visiting or by calling (800) 289-9999. Through BrokerCheck, FINRA releases to the public information reported on uniform registration forms to the Central Registration Depository (CRD). For registered investment advisers, the SEC maintains the Investment Adviser Public Disclosure (IAPD) database.

2. SEC Release No. 34-76106 (Oct. 8, 2015), available at:

3. FINRA Regulatory Notice (RN) 12-10 (February 2012). The study is available at:

4. SEC Release No. 68700 (Jan. 18, 2013), 78 F.R. 5542 (Jan. 25, 2013). This filing was to amend Rule 2267, which requires member firms to provide annually in writing to each of their customers the BrokerCheck hotline number, the FINRA website address, and a notification of the availability of an investor brochure that describes BrokerCheck.

5. See FINRA RN 14-19 at p. 2 (April 2014) for the rule’s background.

6. Id.

7. See SIFMA Letter to Marcia E. Asquith (June 16, 2014).

8. See SEC File No. SR-2015-014 (June 16, 2015) (June 2015 Filing) available at:

9. Id. at pp. 23-24.

10. Id. at p. 24. FINRA noted that a member firm could choose to establish these deep links to an individual’s BrokerCheck page if it so chose. See Letter from Jeanette Wingler, FINRA Assistant General Counsel, to Brent J. Fields, SEC, dated Sept. 21, 2015, at p. 2 (Wingler Letter).

11. Id. at p. 24. FINRA stated that putting the links in emails would be “overly burdensome and require significant system and operational changes, without commensurate benefits.” Wingler Letter at p. 3.

12. June 2015 Filing at p. 25.

13. Wingler Letter at pp. 4-6.

14. June 2015 filing at pp. 25-26.

15. June 2015 Filing at p. 26.

16. Wingler Letter at p. 4.

17. Wingler Letter at p. 6.

18. Wingler Letter at pp. 6-7.

19. Wingler Letter at p. 6.

20. Wingler Letter at p. 7.

21. Wingler Letter at p. 7.


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Legg Mason Looks To Create New ETFs

Yahoo Finance article by Max Chen

Legg_mason_towerLegg Mason Inc. has moved closer toward the exchange traded fund arena, filing with the Securities and Exchange Commission to build index-based stock and bond ETFs.

According to a recent SEC filing, Legg Mason is applying for an exemptive relief to create ETFs that reflect the performance of an underlying index.

“The Initial Fund will be an Equity Fund whose performance will correspond generally to the performance of a securities index developed by a third party (the ‘Initial Underlying Index’),” according to the filing. “Each Fund will seek to provide investment returns that correspond, before fees and expenses, generally to the performance of a specified equity and/or a specified fixed income securities index (each an ‘Underlying Index’ and collectively, ‘Underlying Indexes’).”

The money manager stated that the recent filing is “the next step in building the organizational structure to offer a suite of passively and actively managed ETFs,” reports Trevor Hunnicutt forInvestmentNews.

The company also mentioned that the index-based ETFs are going to be “better beta,” which suggests that offerings could be smart-beta ETFs.

The move into passive index-based ETFs comes as no surprise after the firm snagged two seasoned ETF experts from Vanguard earlier this year. Legg hired Rick Genoni and Brandon Clark to lead its ETF strategy back in February.

Genoni has worked on ETF product management for Malvern, led ETF product management in Vanguard from 2006 to 2011, and took over global ETF product management in 2013.

Clark covered the trading side of the ETF business and took over Vanguard’s capital markets desk in 2012, helping large investors on ETF trade executions.

Legg Mason has already received regulatory approval for actively managed ETFs back in 2012 but has refrained from launching any active ETF strategies.

More large mutual fund providers are looking at the ETF space. For instance, the SEC has already approved, or said it will approve, 19 applications for index-based or active ETFs this year, including American Funds, Goldman Sachs Group and Janus Capital Group.


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Rate Hike From The Fed Seems Likely In December

Reuters article by Jonathan Cable

yellinInflation numbers from the United States on Tuesday could be the provider of the final domino in the Federal Reserve’s track to raise interest rates next month.

Earlier in November a robust report on U.S. employment hardened expectations for the Fed’s first rate increase in nearly a decade and if prices are shown to be rising steadily those views will likely solidify.

Reuters polls see inflation a 1.9 percent year-on-year, unchanged from the previous reading.

Minutes from the Fed’s October meeting will also be published, giving an insight into the Committee’s decision to remove a key sentence on global risks from its policy statement.

“We have had a strong October jobs report and Fed Chair Janet Yellen herself referring to a December rate rise as a ‘live possibility’ for the first time,” said Chris Hare, economist at Investec.

“The coming week should shed a little more light on the prospects for tightening this year.”

While most U.S. data has been relatively upbeat, retail sales rose less than expected in October, suggesting a slowdown in consumer spending that could temper expectations of a strong pickup in fourth-quarter economic growth.

In the meantime, Britain’s Bank of England was once pegged as likely to be the first major central bank to tighten policy but prices fell again last month, data will probably show on Tuesday.


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How To Manage The Impending $30T Wealth Transfer

CNBC article by Kenneth Kiesnoski

millenialsAs the baby boomer generation enters retirement, the greatest wealth transfer in history is getting under way, with some $30 trillion in assets set to be passed on to Gen X and millennial heirs.

How can — or should — boomer parents and grandparents pass on their money? CNBC Senior Personal Finance Correspondent Sharon Epperson turned to three financial advisors to gain some insight.

Certified financial planner Peter Mallouk, president and CIO of Creative Planning, said the first step before gifting heirs is “to at least have gone through a short analysis to make sure that you have all the income you need for the rest of your life.”

Then you can begin gifting $14,000 per recipient per year tax-free, with a lifetime gift exemption of $5.43 million. Figure out if you can truly afford to gift before starting to do so.

Second, you want to make sure you’re protecting your assets while you’re still alive and able to do so.

That means having adequate insurance coverage, said Ivory Johnson, CFP and founder of Delancey Wealth Management.

“Once you’ve grown the assets, now you have to start to protect them,” he said, advising aspiring benefactors to acquire sufficient disability, liability and long-term care coverage so everything is not lost in the event of misfortune.

Lastly, educate your heirs about finance. “You want to make sure they’re responsible enough to spend the money, because otherwise … it’s the exact same thing as having given away all the things you worked for” because you weren’t insured, Johnson said.

Manisha Thakor, director of Wealth Strategies for Women at Buckingham and The BAM Alliance, said she recommends pairing an annual gift of $5,500 — invested in an individual retirement account — to adult children, paired with lessons on investing, asset allocation and how to conduct an annual financial checkup.

“It’s the gift that keeps on giving,” she said. “Not only does it help pass wealth while you’re still alive but it helps you avoid this issue of having everything you worked hard for blow up by giving kids too big of a lump sum at a point in time before they’re educated and ready to really handle it responsibly.”

Mallouk stressed that there are a lot of unknowns in wealth transfer, as well.

“No one really knows what they’re going to spend in retirement,” he said. “There’s lots of rules of thumb, and you have to throw a lot of [them] out the window.”

How much you can or want to bequeath will be affected by health-care expenses, vacation habits and the number of homes you own. If you do start to gift money to your heirs each year, “it’s nice to let the kids know it’s not a pattern,” he said.

“Don’t count on it; don’t budget on it,” Mallouk advised benefactors to tell younger heirs. “We’ll figure this out as we go.”


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South Dakota Trust Firm Sold to North Carolina Private Equity Firm

AcquisitionGaston Capital, a private equity firm in Belmont, North Carolina closed on the purchase of First Capital Surety & Trust Co an independent South Dakota trust company with $400 million in trust assets last week.

First Capital’s operations are based in Milwaukee with 25 employees. Terms of the sale were not disclosed, but experts estimate a sale price of about $5 million.

Gaston Capital owner Michael “Mick” McMahan will serve as chairman and interim CEO of First Capital Surety & Trust Co. until a permanent CEO is hired.

“This suited us very well,” McMahan said in a phone call from Milwaukee, where most of First Capital’s 21 employees are based.

The Milwaukee office administers $400 million in assets. Former owners Frank and Diane Maguire were ready to retire and sell the business and got into contact with McMahan in the spring, he said.

McMahan believes he can grow First Capital 25 percent every year for the next four years.

McMahan is not intimidated by travel from North Carolina to Wisconsin. “The CEO of Bank of America is in Boston. It’s not that difficult,” he said.

Gaston Capital’s investments include a Charlotte hygiene company, a pharmaceutical company in Orlando and biotechnology company in Tampa.

This is the first financial services business Gaston Capital has bought, said McMahan, who has had a career in finance advising.

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Advisors Storm Boston for Cure to Investor Anxiety at Schwab Conference

Schwab’s annual IMPACT conference for independent investment advisors attracted more than 4,500 attendees (1,800 advisors) last week in Boston.impact

More than 6½ years into the bull market, many investors still haven’t regained their confidence.

That, at least, is the impression two high-level strategists at Charles Schwab find when they speak to clients. Despite a rally that has seen the S&P 500 surge 212 percent since the March 2009 lows, the collective psyche remains fragile.

Jeff Kleintop, Schwab’s chief global strategist, spoke Tuesday to the thousands of registered investment advisors at this week’s IMPACT 2015 conference, cautioning them about how “really pessimistic” their clients’ sentiment has become.

“It seems like you’ve got some hope about the future. That’s great. I don’t think your clients do right now,” he said. “The last six months, investors seem to have lost some hope.”

For advisors not familiar, IMPACT is a conference where advisors come together with influential presenters, exhibitors, and panelists to learn about and collaborate on key issues and best practices. Every facet of the conference is designed to help advisors remain at the forefront of the industry and help them to grow or improve their practices.

Advisors heard from Schwab leaders including Bernie Clark, executive vice president and head of Schwab’s advisor services, as well as Walt Bettinger, the president and CEO of Schwab.

This year marks the 25th anniversary of Schwab’s IMPACT conference.

Independent Advisor Outlook Study results

At the conference, Schwab Advisor Services released the latest Independent Advisor Outlook Study. The study said a majority of independent registered investment advisors (RIAs) are projecting firm growth in the year ahead and revealed widespread optimism against the backdrop of the market downturn of the third quarter.

Half of all advisors who participated in the study expect their firms to grow between five and 10 percent in the coming year, with 32 percent anticipating growth between 11-20 percent, and 15 percent projecting growth rates over 20 percent.

To view the survey findings (PDF), click here.

Bernie Clark highlights RIA growth

Bernie Clark

Bernie Clark

Bernie Clark, executive vice president of Schwab Advisor Services, recognized and celebrated the tremendous growth and success of the independent registered investment advisor industry over the past decade. Assets under management increased to $4 trillion from $1.6 trillion.

Clark pointed to the opportunities for future growth of the industry, citing an estimated $23 trillion in affluent assets, from households with $500K or more to invest, that currently reside outside the RIA channel and represent “the kind of clients RIAs are well-suited to serve.”

Clark also indicated that technology is a growth enabler for RIA frims: “Technology is no longer simply equated to productivity or back-office data management. When envisioned and implemented strategically, technology is a growth enabler.”

Concern over potential interest rate hike and slow growth

Jeff Gundlach, CEO and co-founder of DoubleLine, questioned whether the financial industry was ready for a potential interest rate hike in December.

Bill Priest, founder, CEO and portfolio manager for Epoch Investment Partners, said that the world economy will continue to grow – but slowly. “Two percent is the new 4 percent,” Priest said. “It turns out that the U.S. will be the only geography to experience growth.”

Automated investing – robo investing

Schwab CEO Walt Bettinger said that financial advisors should think of automated investing as another arrow to add to their own quivers, not as competitors.

According to the Independent Advisor Outlook Study, more than one third (37%) of advisors consider that up to ten percent of new client assets in the next year are likely to be appropriate for automated investment management, and an additional 21 percent say more than ten percent of new assets are likely to be suitable.

The majority (70%) of advisors say they would recommend automated investing for clients who don’t meet the firm’s asset minimums, or clients with relatively simple investment needs (67%), and half of advisors (54%) would recommend automated investing for children of existing clients or as a strategy to capture intergenerational wealth (24%).

Schwab plans to expand its direct-to-consumer automated investment platform, called Schwab Intelligent Portfolios. Bettinger said the company may add mutual funds and individual securities to the platform. Other changes will include expanded account registrations and additional goal tracking capabilities.

Brian Shenson, Schwab’s VP of Advisor Technology Solutions, said Schwab’s multi-custodial solution, Advisor Portfolio Connect, will be a “primary focus” in 2016 and its various platforms will add support for vendors such as Redtail, Selentica, Orion, Moringstar, and Envestnet.

Exhibitors, education, and fun

IMPACT 2015 featured some 350 exhibitors including asset managers and a number of technology and other types of vendors. The technology kiosk had over 50 different technology vendors and many demonstrated their latest solutions. ITEGRIA, a strategic technology support partner to RIA firms, is one vendor that stood out.

Advisors had the opportunity to attend an enhanced schedule of over 75 educational sessions, including investment strategies, practice management advice, and technology implementation. Cybersecurity and compliance were also hot topics.

Throughout the conference there was lots of networking and discussion. Envestnet and MarketCounsel co-sponsored an evening party, and one afternoon craft beer was featured and distributed.

Besides investment talk, several celebrated speakers were present. Fareed Zakaria spoke about the Middle East and New York Times commentator David Brooks spoke about current events. Yo-Yo Ma also performed on cello.

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